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Oil prices rose on Thursday as a sharp drop in oil stockpiles outweighed concerns that a spike in US coronavirus infections and revived lockdown measures in California could stall a recovery in fuel demand.
Brent crude LCOc1 futures were up 21 cents or 0.5 per cent at $42.24 a barrel by 1114 GMT, after rising 1.8 per cent in the previous session.
US West Texas Intermediate (WTI) crude CLc1 futures rose 20 cents, or 0.5 per cent, to $40.02 a barrel, adding to a 1.4 per cent rise on Wednesday.
US crude inventories USOILC=ECI fell 7.2 million barrels from a record high last week, far more than analysts had expected, US Energy Information Administration data showed, as refiners ramped up production and imports eased.
“Typically a drop in inventories signals a positive development in demand or a negative move in supply. But as supply is fairly stable, the market assumes demand stands strong, despite the new COVID-19 infections and restrictions,” said Louise Dickson, oil markets analyst at Rystad Energy.
“New lockdowns in California would have depressed the market any other day, but yesterday’s EIA inventory report balanced the bad news and prevailed.”
New US Covid-19 cases rose by nearly 50,000 on Wednesday, according to a Reuters tally, in the biggest one-day spike since the start of the pandemic.
California rolled back efforts to reopen its economy, banning indoor restaurant dining in much of the state, closing bars and beefing up enforcement of social distancing and other measures.
Capping gains, however, analysts noted that gasoline stockpiles were higher despite expectations of a fall.
Analysts highlighted worries about the spike in cases in heavily populated US sun belt states, which are among the country’s biggest consumers of gasoline.
Attention will be on US driving activity over the upcoming July 04 holiday weekend and how quickly US producers revive shut-in production, analysts said.